Free Markets, Free People
Ben Bernanke, the Chairman of the Federal Reserve, announced today that the Fed will embark on another round of Quantitative Easing, beginning immediately. The Fed will increase its holdings by an estimated $85 billion per month in securities, about half of which will be long-term Treasury bonds, and the remaining $40 billion or more will be agency mortgage-backed securities. The agency paper will be purchased with new cash, while the long-term Treasuries will be acquired in exchange for short-term Treasury paper, as a continuation of Operation Twist.
There is no ultimate target amount or end date specified for this round of easing. Essentially, the Fed will buy or exchange $1 trillion in securities per year, until chairman Bernanke says to stop. It is completely open-ended. Additionally, the Fed expects to keep interest rates at or near 0% until sometime in 2015.
Let’s be clear about what this announcement means: The Fed will print $500 billion per year in new money, and inject it into the economy by buying agency paper (Freddie Mac, Fannie Mae, et al.), while also flooding the market with $500 billion of short-term paper in exchange for long bonds. That new money is not based on any realistic estimate of economic growth, or economic requirement to expand the money supply. It is pure, Keynesian monetary stimulus.
This will, of course, be done in a completely responsible way, and there is no threat whatsoever that this will cause an increase in inflation, and in any case, the Fed is fully prepared to sterilize this move at any time conditions warrant. Seriously, it’s best for the Fed to do this, and nothing could possibly go wrong.
Some may disagree.
Anyway, here’s some video of the first round of this open-ended QE being implemented:
Image via Max Keiser
The following US economic statistics were announced today:
Initial jobless claims rose 15,000 in the latest week to 382,000. The 4-week moving average rose to 375,000. But, continuing claims are down 49,000 to 3.282 million. Much of this week’s rise is blamed on Tropical Storm Isaac, which led to increased claims.
The producer price index rose a sizable 1.7% in August—mainly on sharp increases in food and energy prices—after a 0.3% rise in July. Ex-food and energy prices, the core PPI rose 0.2%.
The Bloomberg Consumer Comfort Index rose sharply on improved personal finances, up 4.3 points to -42.2. Despite the sharp improvement, the CCI is still at a deeply depressed level, of course.
Oh, wait … Yemen too?
Yup, that “Arab Spring” thing is sure a positive for the US. Says the NY Times:
Turmoil in the Arab world linked to an American-made video denigrating the Prophet Muhammad spread on Thursday to Yemen, where hundreds of protesters attacked the American Embassy, two days after assailants killed the American ambassador in Libya and crowds tried to overrun the embassy compound in Cairo.
Is it about an “American-made video” really?
There are reports that those who stormed the embassy in Cairo were chanting: “Obama, Obama! There are still a billion Osama’s!”
They certainly weren’t chanting the crazy pastor’s name.
And it was done when? Oh yeah, on September 11th. And what was it they raised after they tore down the American flag and burned it?
Say, wasn’t it Al-Queda’s flag?
So, spontaneous, huh? In reaction to a film, eh?
Meanwhile in Libya, it appears that the “spontaneous” riot was a carefully planned assasination plot. And it worked.
But stick with that “in reaction to a film about Mohammed” nonsense, MSM.
The New York Times leads with that, but in passing, in the 24th paragraph of the story, it almost figures it out:
Also on Tuesday, a car bomb exploded in Yemen alongside a convoy of vehicles used by Yemen’s defense minister, killing seven bodyguards and five civilians in the heart of the capital, while the minister escaped unharmed, government and hospital officials said. The attack came one day after a top operative of Al Qaeda in Yemen was killed in what Yemeni officials called an American drone strike.
Those episodes and the violence on Thursday spoke to the continued volatility in poverty-stricken Yemen, where the United States is seeking to eradicate militant cells held responsible for a number of conspiracies, including an attempt by an operative of Al Qaeda to detonate a bomb hidden in his clothes on a flight bound for Detroit in December 2009.
Sorry folks … not buying the “this is about a film” nonsense. This is and was planned to happen on 9/11 in the same year Osama bin Laden was killed.
For goodness sake, consider the facts and think about it instead of sucking up the MSM pablum designed to protect the incumbent president (after all, why was the story about a dead US ambassador on an inside page and the NY Times condemnation of Mitt Romney on page 1?).
We’ve heard the claims about how corn ethanol has lowered the price of gasoline and made us more energy independent. Don’t believe them.
Economics professors at the Massachusetts Institute of Technology report ethanol mandates do not lower the price of gasoline, despite claims by the ethanol industry.
A recently published MIT study debunks the oft-repeated claim that ethanol usage reduces the price of gasoline at the pump.
The MIT study, “Ethanol Production and Gasoline Prices: A Spurious Correlation,” analyzes and refutes claims by the ethanol industry that ethanol reduced gasoline prices by nearly a dollar per gallon in 2010 and more than a dollar per gallon in 2011.
You see, as we’ve mentioned here, ethanol doesn’t provide the power that pure gasoline does, so it takes more of the ethanol mixed gasoline to provide the same distances that pure gasoline gives us.
The MIT study points out the largest variable for the price of gasoline is the cost of crude oil. Wholesale gasoline prices go up when the price of a barrel of oil goes up. Ethanol, by contrast, has a minimal impact on the cost of crude oil, the study notes.
The study further explains that ethanol has 33.3 percent less energy than gasoline, so engines need more of it to power a vehicle for the same distance.
As to the claims of lower prices because of ethanol?
“The fact is ethanol, because it only contains about 60 percent of the energy provided by gasoline, does not have the same value, making direct price comparisons meaningless.
And, given that the largest variable for the price of gasolineis the cost of crude oil, what about the 2010 and 2011 claims:
“Put simply, the empirical results merely reﬂect the fact that ethanol production increased during the sample period whereas the ratio of gasoline [prices] to crude oil prices decreased,” the study explained.
“The claim that ethanol reduces gasoline prices is just silly and is based on the fallacy that correlation equals causation,” said Tom Tanton, president of energy economics consultants T2 & Associates.
He added, “As I testified to Congress in early July, corn-based ethanol may provide some energy security from some geopolitical risks associated with the petroleum market, but it creates a serious weather-related risk. With 25 percent of our corn crop used to make ethanol, and most corn grown only with natural rainfall, our fuel supply has only traded one type of risk for another.
“We’d be more secure if we produced our own vast reserves of petroleum and brought in Canadian, and enjoy lower prices to boot,” Tanton said.